Japan Calling

Rather than call bottoms on indexes, I look at the market and my portfolio first, then I think about maximizing the bets already on the table. Readers know I've favored Japanese assets, including the yen, for quite some time. Alas, Japanese equities, like equities world-wide, have been mostly losers since I started talking about them in the spring. The rare exceptions that have actually performed well include the big Japanese telecoms, which are among the precious few holdings in my book showing gains. That alone is enough to pique my interest.

Most people relish buying the weakest stocks on the board. But for my money, I try and leave the sickest-looking pups at the pound and go home with the strongest of the litter. And while telecommunications, both fixed-line and mobile, have been weak overall, these Japanese names have held up remarkably well.

On the wireless side, shares of NTT DoCoMo (DCM) are higher by about 10% over the past year, compared to sharp double-digit losses at global rivals Vodafone Group (VOD), Deutsche Telekom (DT), America Movil (AMX), China Mobile (CHL) and Verizon Communications (VZ).

NTT DoCoMo (DCM) vs. VZ, CHL, AMX, DT, VOD 1 year

DoCoMo's biggest shareholder, as mentioned in this space back in October, is fixed-line operator Nippon Telephone and Telegraph (NTT), whose shares are now up on both a year-to-date and one-year basis. This modest return far outpaces China Telecom (CHA), BT Group (BT), France Telecom (FTE), Telefonica (TEF) and other fixed-line rivals world-wide.

Nippon Telephone and Telegraph (NTT) vs. CHA, BT, FTE, TEF 1 year

One of the things I keep a close eye on are the intraday mechanics of weakness and strength. So when the market is rallying or dropping, even during the trading day, I'll try and get a sense of what stocks and sectors are leading the way. Banks, although still weak stocks, have been replaced by energy as the prominent laggards intraday. When the S&P 500 index is notching new lows, it's doing so right alongside names like Apache (APA), National Fuel Gas (NFG) and Permian Basin Royalty Trust (PBT).

Although NTT and DCM aren't part of the major U.S. indexes, both appear to show a willingness to lead the charge when the broad market can manage a rally.

In good times or in bad, you can end up waiting on the sick to recover for a long time. Some, like satellite-radio operators or the auto makers, never do. My belief is that you always want the healthiest of the lot. Right now these Japanese telecoms are some of the strongest stocks that I can find. That's why I own them both.

Chris Dodd's Management Coup

Sen. Chris Dodd wants to oust Rick Wagoner as CEO of General Motors (GM). The Democratic senator from Connecticut told CBS's "Face the Nation" that Wagoner "has to move on" because the company needs new leadership.

Of course, that's not his decision, nor that of President-elect Barack Obama. Dodd isn't a 5% owner of GM. In fact my guess would actually be that he doesn't own a single share. Yet now he's presuming a power greater than those 364,000 shareholders who actually do put their money on the line. Appointing management is the responsibility of the shareholders, and more likely in the case of GM, the bondholders the folks who actually own the company.

While Dodd is currently chairman of the Senate Banking Committee, a powerful post, from what I could gather from his web site and Wikipedia, the senator seems to have very little actual business experience. He has, however, served in the Peace Corps and dated Bianca Jagger.

Two months ago I described the bailouts as nothing more than a Washington power grab. That politicians are now the de facto managers of scores of companies, first the financials and now autos, demonstrates this frightening phenomenon in full effect.